What to expect when closing on a house

People looking at home they just bought

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Closing on a house marks the beginning of a new chapter in your life. But this crucial final step towards homeownership includes lots of documents, signatures and fees. Here’s a closer look at what to expect on your closing day.

What is the closing process?

Closing is the final step in what is often a lengthy process associated with a real estate sale:  The time between signing a purchase and sale agreement and reaching the closing table can take as least a couple of months. For homebuyers, closing is the day they officially take over ownership of the property and receive the keys. For sellers, meanwhile, closing is the day proceeds from the transaction will be received.

By the time closing arrives, many important steps have to be completed. Unless they’re paying in cash, the prospective buyer will have secured the mortgage needed to purchase the property. An appraisal of the home and an independent third-party inspection of its condition will have been carried out. Any additional discussions of costs, repairs and fixtures will have been satisfactorily settled. The buyer will do a final walk-through of the property. Usually, the seller has packed up and departed.

On closing day itself, the homebuyer will be required to sign a great deal of paperwork that finalizes the deal. Often there are many other parties present for closing day, including the seller, the lender, real estate agents, the closing agent and often an attorney who will also review the paperwork being signed.

How long does it take to close on a house?

The timeline between making an offer and closing a sale can vary. For home purchases financed with mortgages, the average time to close is 50 to 51 days, according to ICE Mortgage Technologies, a mortgage advisory and technology platform. It is possible for closings to be as quick as 30 days, though, especially in all-cash deals.

Securing the mortgage is one factor that often takes the most time in mortgage closings. Applying for a mortgage preapproval before you start shopping for a home can help you close sooner because a few of the verification processes will be completed ahead of time.

What factors may cause closing delays?

A number of things can hold up your closing including a low appraisal, unmet contingencies, title problems, and a foul-up with the mortgage funds.

Low appraisal

An appraisal is a professional assessment of the worth of the home you’re interested in buying, ordered by the mortgage lender. The purpose of an appraisal is to ensure that the sale price of the home aligns with its fair market value. This step has the potential to impact closing if the home appraises for less than the purchase price — and/or the amount you’re seeking to borrow. The lender won’t loan you more than the appraisal value. So if you don’t have the cash to make up the difference, called an appraisal gap, your deal could be tanked.

Failure to secure financing

If you don’t secure a mortgage — because something changes in your finances or the money doesn’t come through or is delayed for some other reason — it could slow down your closing or cause it to be scrapped entirely.

Unmet contingencies

Contingencies in a real estate contract allow either one of the parties to back out of the deal if certain  specified conditions are not met. This could include a home inspection that reveals serious problems with the home or the purchase being contingent upon the buyer securing financing (see above) or the seller acquiring a new home.  If these or other contingency-related challenges arise, it can stall the deal or cause it to fall apart altogether.

Title issues

In order for any real estate sale to close, the title must be clear — that is, free of any claims or doubts about ownership. That means if there is any sort of lien or claim to the property, the closing cannot proceed until that issue is cleared up. Liens might be placed on a property by the Internal Revenue Service or the state government if back income or property taxes are owed by the homeowner.

Steps to prepare for closing on a house

Closing on a property is complicated. Here’s what you need to do to get ready:

1. Consider hiring a real estate lawyer

Buying a house isn’t just a transaction between the buyer and seller. It’s also a relatively complex legal process. To help you navigate the process, you may benefit from hiring a real estate attorney who can ensure the closing goes smoothly. This is usually optional, but having a lawyer on your side can help you avoid unexpected issues down the line.

2. Open an escrow account

Most homebuyers open an escrow account during the start of the closing process, which is typically managed by a title company. This account holds all the money associated with the sale, like an earnest money deposit, before you officially close on the house. When closing ends, the mortgage provider distributes the funds to the seller and buyer respectively, ensuring a secure transaction.

3. Run a title search

Run a title search on the property you are purchasing early in the closing process. A title search will bring up any issues with the title, such as an existing lien or unpaid property taxes, which could jeopardize your legal right to buy and live in the home. Also consider buying title insurance during this time, which would cover the cost of title claims during your ownership.

4. Get a home inspection

Getting a home inspection is an important part of closing. Even the most beautiful houses can have hidden issues.

During a home inspection, a contractor or professional inspector will check the home for major issues, like foundation cracks, leaks, problems with the plumbing or electrical system, and potential safety hazards. Depending on the results of the inspection, you might decide to back out of the deal or you can ask the seller to fix the issues as a contingency of the sale.

5. Negotiate your closing costs

Although closing costs can be expensive, some costs are negotiable. See if your lender is willing to lower the origination fee or waive an application fee. If lender’s title insurance is required, ask your mortgage company if you can shop around to find the best rate rather than paying a fixed fee from the insurance company of their choice.

6. Confirm your closing date

The next step is to confirm your closing date. This is the date when the seller will be fully moved out of the home, and you will be able to move in. Keep in mind that the closing date is usually at least one month after the purchase offer has been accepted. It can take even longer if you run into unexpected hurdles during the closing process. Once you have confirmed the closing date, you can start packing your things and phoning moving companies.

7. Do a final walk-through

Even if your initial home inspection went smoothly, it’s still a good idea to do a final walk-through right before you move into the new house. It is always possible that damage could have occurred between the first inspection and your move in date. During the final walk-through, make sure the seller made all the necessary repairs and removed everything that was not included in the purchase and sale agreement from the house and the property.

8. Understand your closing documents

At the closing, you will receive a number of important documents to sign. It could be upwards of 100 pages, so make sure to ask your real estate attorney or realtor to explain what each document is for. Here are some of the documents you can expect to receive:

  • Loan estimateThis document contains important information about your loan, including terms, interest rate and closing costs. Make sure all the information is correct, including the spelling of your name.
  • Closing disclosure: Like the loan estimate, the closing disclosure outlines details of your mortgage. You should receive this form at least three days before closing. This window of time gives you a chance to compare what’s on the loan estimate to the closing disclosure.
  • Initial escrow statementThis form contains any payments the lender will pay from your escrow account during the first year of your mortgage. These charges include taxes and insurance.
  • Mortgage note: This document states your promise to repay the mortgage. It indicates the amount and terms of the loan and what the lender can do if you fail to make payments.
  • Mortgage or deed of trust: This document secures the note and gives your lender a claim against the home if you fail to live up to the terms of the mortgage note.
  • Certificate of occupancy: If you are buying a newly constructed house, you need this legal document to move in. Ask for a copy of the title policy and survey, as well.
  • Purchase agreement: A binding contract that spells out the terms of a real estate transaction. Signing it finalizes the purchase of a property.

What happens at the closing of a house?

On closing day, you will have two primary responsibilities: signing legal documents and paying closing costs and escrow items. The documents that you’ll sign pertain to the agreement between you and your lender regarding the terms and conditions of your mortgage and also the agreement between you and the seller, who is transferring ownership of the property. It is important to read all of these documents carefully so that you know exactly what you’re agreeing to.

Additionally on closing day you’ll be required to pay all closing costs and escrow items. There are a number of fees associated with obtaining a mortgage and transferring property ownership. These fees include property taxes, utilities bills and HOA fees. The funds are usually provided via a certified check or cashier’s check made out to the escrow company or a wire transfer of funds to the banking institution. Personal checks are often not allowed.

It’s also important to find out what type of identification is required before you arrive on closing day. Usually, only one type of ID is needed, though some companies require two. The items you’re typically required to bring include:

  • Government-issued identification, such as a driver’s license or passport
  • Marriage certificate if you’re purchasing the property with a spouse and do not have the same last name
  • A certified check for the down payment and closing costs
  • Proof of homeowners insurance

You may be able to move into the home on the very same day that closing is complete—perhaps as soon as you finish signing the paperwork. This timeline however, may be impacted by any contingencies in the contract related to the seller staying in the home for a period of time after closing. This scenario is often referred to as a rent-back and is typically requested so that the seller has time to find a new home or ready it for occupancy.

Who is present at the closing?

Closing on a home is often done in steps and on different days. All parties do not have to be present, but the following parties often are:

  • Closing agent, who might work for the lender or the title company
  • Attorneys: The closing agent might be an attorney representing you or the lender. It’s always a good idea to have a real estate lawyer present who represents you and only your interests.
  • Title company representative, who provides written evidence of the ownership of the property
  • Home seller or their representative
  • Seller’s real estate agent
  • You, the buyer, or your representative
  • Your real estate agent
  • Your lender

The closing agent conducts the settlement meeting and makes sure that all documents are signed and recorded and that closing fees and escrow payments are paid and properly distributed.

How much are closing costs?

Closing costs are the fees and expenses you must pay before becoming the legal owner of a house, condo or townhome. You can expect to pay 2-5 percent of the mortgage loan in closing costs. The 2021 national average for closing costs including taxes was $6,905 including transfer taxes, according to CoreLogic. Washington D.C. had the highest average closing costs at $29,888, while Missouri had the lowest at $2,061, according to the same report.

Closing costs vary depending on the purchase price of the home and how it’s being financed but typically, closing costs include:

  • Origination fee, which you pay to your lender to start the loan application
  • Underwriting fee, which you pay to your lender to process the application
  • Appraisal fee, which you pay to your lender to get an estimate of the property’s value, to ensure you’re paying a fair price and they’re not lending you more money than the house is worth
  • Credit report fee, which you pay to your lender to have your credit checked
  • Title search fee, which you pay to an agency to make sure the seller has the right to sell you the property
  • Recording fee, which you pay to the local municipality to make the transaction official and enter it in its records
  • Transfer taxes, which you pay to the relevant local or state government agencies

Closing costs can be rolled into the mortgage amount (known as a no-closing cost mortgage) or paid upfront to avoid paying additional interest.

Some of the additional costs you might encounter on closing day include an attorney’s fee, notary’s fee and city or county fees/taxes that some municipalities have on real estate transactions.

Written byMia TaylorContributing Writer

 

Taylor, Mia. “What to Expect at a Real Estate Closing.” Bankrate, 1 Feb. 2023, www.bankrate.com/mortgages/understanding-the-closing-process/#steps-to-prepare.

How to get a mortgage by Bankrate

For most Americans, taking out a mortgage makes buying a home possible. Obtaining this sort of financing — never a stress-free procedure — has gotten even more stressful of late, given the lightning rise in mortgage rates. You might even wonder if it’s still possible to qualify for a mortgage and buy a home.

Don’t fret: Getting a mortgage can take some time and effort, but we’re here to help. This guide to getting a mortgage breaks down every step of the process so you’ll know what to expect.

What are mortgage lenders looking for?

Mortgage lenders, like any lender, want reassurance that you will pay back the money that you borrow. That means they’re looking for reliable, creditworthy applicants with sufficient income, consistent repayment histories and manageable levels of debt. Safe bets, in other words.

They’re also looking at the value of the property you want to buy, making sure it’s worth enough to serve as collateral for your new loan.

Factors that go into a lender’s decision on whether or not to approve your mortgage application include:

Steps for getting a mortgage

Step 1: Strengthen your credit

robust credit score (in the 700s, preferably) demonstrates to mortgage lenders that you can responsibly manage your debt. “Having a strong credit history and credit score is important because it means you can qualify for favorable rates and terms when applying for a loan,” says Rod Griffin, senior director of Public Education and Advocacy for Experian, one of the three major credit reporting agencies.

If your credit score is on the lower side, you could still get a loan, but you’ll likely pay a higher interest rate.

To improve your credit before applying for your mortgage, Griffin recommends these tips:

If your score isn’t the strongest, there are financing options, such as FHA loans, that can offer approval for people with scores as low as 580 or even lower.

Step 2: Know what you can afford

It’s fun to fantasize about a dream home with every imaginable bell and whistle, but it’s much more practical to purchase only what you can reasonably afford. Rising interest rates make monthly mortgage payments even higher, so you might have to adjust your expectations (if not your budget) to find an affordable home.

Katsiaryna Bardos, finance department chair at Fairfield University in Fairfield, Connecticut, says one way to determine how much you can afford is to figure out your debt-to-income ratio (DTI) — a criterion lenders often look at, as noted above. DTI is calculated by summing up all of your monthly debt payments and dividing that figure by your gross monthly income.

“Fannie Mae and Freddie Mac loans accept a maximum DTI ratio of 45 percent. If your ratio is higher than that, you might want to wait to buy a house until you reduce your debt,” Bardos suggests. Many financial advisors recommend keeping the ratio closer to 36 percent, especially for conventional loans (that is, non-government ones).

Even with the 45 percent threshold, the lower your DTI ratio, the more room you’ll have in your budget for expenses not related to your home. That’s why Andrea Woroch, a Bakersfield, California-based personal finance and budgeting authority, says it’s essential to take into account all your monthly expenses and your set-asides for far-off plans.

“The last thing you want to do is get locked into a mortgage payment that limits your lifestyle flexibility and keeps you from accomplishing your goals,” Woroch says — a condition known as “house poor.”

You can determine how much house you can afford by using Bankrate’s calculator, which factors in your income, monthly obligations, estimated down payment and other details of your mortgage.

Step 3: Build your savings

Your first savings goal should be: enough for a sufficient down payment.

“Saving for a down payment is crucial so that you can put the most money down — preferably 20 percent to reduce your mortgage loan, qualify for a better interest rate and avoid having to pay private mortgage insurance,” Woroch explains.

It’s equally important to build up your cash reserves. One rule of thumb is to have the equivalent of roughly six months’ worth of mortgage payments in a savings account, even after you fork over the down payment. This cushion can help safeguard you if you lose your job or something else unexpected happens.

Also, don’t forget closing costs, which are the fees you’ll pay to finalize the mortgage. They typically run between 2 percent to 5 percent of the loan’s principal. They don’t include escrow payments, either, which are a separate expense. Generally, you’ll also need around 1 to 4 percent of the home’s price for annual maintenance and repair costs.

Step 4: Compare mortgage rates and loan types

Once your credit score and savings are in an adequate place, start searching for the right kind of mortgage for your situation. You’ll also want to have an idea of how mortgages work before moving forward.

The main types of mortgages include:

Look at the interest rates and fees for each loan, which collectively amount to its annual percentage rate (APR). Even a small difference in interest rate can result in a big savings over the long run. Also consider things like whether you’ll have to pay for mortgage insurance, and for how long.

Bankrate insight
first-time homebuyer of limited means/credit history might consider an FHA loan, which requires a minimum credit score of 500 with a 10 percent down payment or a minimum score of 580 with as little as 3.5 percent down. A conventional loan could be a better fit for a homebuyer with a higher credit score and the means to afford the conventional 20 percent down payment savings.

Mortgages can have a fixed or adjustable rate, meaning the interest rate stays the same for the duration of the loan term or fluctuates over time, respectively. Most home loans have 15- or 30-year terms, although there are 10-year, 20-year, 25-year and even 40-year mortgages available.

Adjustable-rate mortgages (ARMs) might come with a lower rate and monthly payment initially, but can become more expensive over time if rates rise. If it’s an interest-only ARM — meaning for a set period, your payments only go towards interest, not the loan principal —  it’s almost guaranteed that your payment will increase once your rate-lock period ends. If you can’t afford that risk, the fixed-rate is the way to go.

Step 5: Find a mortgage lender

Once you’ve decided on the type of mortgage, it’s time to find a mortgage lender.

“Speak with friends, family members and your agent and ask for referrals,” advises Guy Silas, branch manager for the Rockville, Maryland office of Embrace Home Loans. “Also, look on rating sites, perform internet research and invest the time to truly read consumer reviews on lenders.

“[Your] decision should be based on more than simply price and interest rate,” says Silas. “You will rely heavily on your lender for accurate preapproval information, assistance with your agent in contract negotiations and trusted advice.”

If you’re not sure exactly what to look for, you might want help. A mortgage broker can help you navigate all the different loan options available to you and possibly help you get more favorable terms than you’d be able to secure by applying on your own. Remember that interest rates, fees and terms can vary substantially from lender to lender.

Step 6: Get preapproved for a loan

It’s a good idea to get preapproved for a mortgage once you’ve found a suitable lender. With a preapproval, the lender will review your finances to determine if you’re eligible for funding and an amount they’re willing to lend you.

“Many sellers won’t entertain offers from someone who hasn’t already secured a preapproval,” Griffin says. “Getting preapproved is also important because you’ll know exactly how much money you’re approved to borrow.”

Be mindful that mortgage preapproval is different from prequalification. A preapproval involves much more documentation and a hard credit check; mortgage prequalification is less formal and is essentially a way for a lender to tell you that you’d be a good applicant.

Still, preapproval doesn’t guarantee you’ll get the money or any particular loan terms. That has to wait until you’ve actually found a place to purchase.

Step 7: Begin house-hunting

With preapproval in hand, you can begin seriously searching for a property that meets your needs. When you find a home that has the perfect blend of affordability and livability, be ready to pounce.

“It’s essential to know what you’re looking for and what is feasible in your price range,” Bardos notes. “Spend time examining the housing inventory, and be prepared to move quickly once the house that meets your criteria goes on the market.

“Utilize social media and ask your agent for leads on homes going on the market before they are listed on the MLS,” he also recommends.

Step 8: Submit your loan application

If you’ve found a home you’re interested in purchasing, you’re ready to complete a mortgage application. These days, most applications can be done online, but it can sometimes be more efficient to apply with a loan officer in person or over the phone. You might be better able to establish a relationship with the loan officer in person, too, which can work to your advantage if you have questions in the process or issues come up.

The lender will also pull your credit report to verify your creditworthiness.

Step 9: Wait out the underwriting process

Even though you’ve been preapproved for a loan, that doesn’t mean you’ll ultimately get financing from the lender. The final decision will come from the lender’s underwriting department, which evaluates the risk of each prospective borrower, the nature of the property, and determines the loan amount, interest rate and other terms.

“After all your financial information is gathered, this information is submitted to an underwriter — a person or committee that makes credit determinations,” explains Bruce Ailion, an Atlanta-based real estate attorney and Realtor. “That determination will either be yes, no or a request for more information from you.”

There are a few steps involved in the underwriting process:

  1. First, a loan officer will confirm the information you provided during the application process.
  2. After you make an accepted offer on a home, the lender will order an appraisal of the property to determine whether the amount in your offer is appropriate. The appraised value depends on many factors, including the home’s condition and comparable properties, or “comps,” in the neighborhood.
  3. title company will conduct a title search to ensure the property can be transferred, and a title insurer will issue an insurance policy that guarantees the accuracy of this research.
  4. Finally, you’ll get a decision from the underwriter: approved, approved with conditions, suspended (meaning more documentation is needed) or denied.

Step 10: Close on your new home

Once you’ve been officially approved for a mortgage, you’re nearing the finish line. All that’s needed at that point is to complete the closing.

“The closing process differs a bit from state to state,” Ailion says. “Mainly it involves confirming the seller has ownership and is authorized to transfer title, determining if there are other claims against the property that must be paid off, collecting the money from the buyer, and distributing it to the seller after deducting and paying other charges and fees.”

There are a variety of expenses that accompany the closing. Common closing costs include:

You will review and sign lots of documentation at the closing, including details on how funds are disbursed. The closing or settlement agent will also enter the transaction into the public record.

What documents do you need to get a mortgage?

Getting a mortgage involves a lengthy process. Your lender is likely providing hundreds of thousands of dollars to purchase a home, so it wants to make sure that you’ll be able to repay that loan.

Expect to need the following documents for the underwriters, who are evaluating your application:

Your lender will request the specific documents it wants to see.

Bottom line on getting a mortgage

They say you shouldn’t put the cart before the horse. The same is true in the homebuying process. You’ll need to complete several steps to finance a home, so the more you learn about what’s required, the better informed your decision-making will be.

If you’re denied a mortgage, there’s no barrier against trying again in the future.

“If you are unable to qualify for a loan with favorable terms, it may make more sense to simply wait until you can make the necessary changes to improve your credit history before trying again,” Griffin suggests. “A bit of patience and planning can save a lot of money and help you get the home you want.”

https://www.bankrate.com/mortgages/how-to-get-a-mortgage/#faq

 

Comparative Market Analysis: A Guide

VICTORIA ARAJ7-MINUTE READ

MARCH 31, 2023

When you’re in the market for a new home or looking to sell your current one, figuring out how much to offer or ask can be a considerable challenge. How much a house is worth can seem fairly subjective, considering how many factors go into determining it. However, pricing property is a science. That’s why real estate agents conduct a comparative market analysis (CMA).

What Is A Comparative Market Analysis (CMA) In Real Estate?

A comparative market analysis is a tool that real estate agents use to estimate the value of a specific property by evaluating similar ones that have recently sold in the same area. It can be extremely challenging to reliably estimate the fair market value of a home because there are a significant number of factors that go into determining how much a specific property is worth.

 

When people who are buying a house or selling theirs think of factors that impact the listing price, they typically consider location, square footage and the number of bedrooms and bathrooms. But the property’s age, condition, features, lot size and so on, as well as the conditions of the local and national housing markets, affect the value of residential real estate as well.

See What You Qualify For

How Is A Comparative Market Analysis Prepared?

In order to conduct the analysis, real estate agents search for recently sold homes in the same area that are as similar to the subject property as possible.

 

These homes, which are known as comps, or comparable sales, are used to conduct a sales comparison approach to pricing. This approach relies on the premise that you can figure out how much a home is worth by identifying how much it would cost to purchase a similar property of equal desirability.

The Rule Of Three

The first step for an agent preparing a CMA is to find three homes that have sold recently (within the past 6 months at most, but preferably 3 months). These three homes should be as similar and located as closely together as possible.

 

Once at least three comps are selected, each one is thoroughly examined to pinpoint how it differs from the home in question. After the differences are itemized and priced out, the sales price of each comp is adjusted to determine how much it would cost if it were nearly identical to the subject property and sold in the current market.

What’s The Difference Between A Comparative Market Analysis And An Appraisal?

Although a comparative market analysis uses similar housing market indicators to compare and identify regional home values, it’s not considered an official home appraisal. Whereas home appraisals are conducted by appraisers to create home valuations, CMAs are completed by licensed real estate professionals to estimate the fair market value.

 

Even though the resulting value is an approximation that also incorporates the goals of the seller or buyer of the property, a CMA is a complex process that requires technical knowledge of the overall market and how various aspects of real estate impact how much a property is worth.

Taking Market Conditions Into Account

Market conditions are a wild card with comparative market analysis and price setting in general. That’s why it’s best to use homes that have sold as close in time to the home currently being priced. A strong buyer’s or seller’s market might upend CMA values.

 

For example, a rapidly gentrifying neighborhood might not have strong comparable properties because housing prices can change dramatically within just a few months. If you’re looking for a home in a rapidly appreciating neighborhood, just remember that even though buyers and sellers may come to an agreement on price, in order to get financing, a home appraisal will be needed to determine if that price is justified.

What Goes Into A Comparative Market Analysis?

Although completing a comparative market analysis is a complex process, it’s broken down into separate, manageable parts. These parts collectively give sellers and buyers a thorough value estimate.

 

Analysis begins with agents compiling a list of at least three similar properties within the same area that have sold in the last 3 – 6 months. If there isn’t enough sales data or if the potential purchasing price of a home is being calculated, agents may also select properties that are currently listed on the market or pending. Even expired listings can be used to demonstrate the kinds of prices that are too high to attract interested buyers.

 

Here’s a list of the various components that go into a CMA:

  • Location: The best comps will be located in the same neighborhood as the subject property. However, if there haven’t been enough recent sales in the area to complete the CMA, the agent will select comps located in an area that is considered similar due to the quality of local schools, crime rate, noise level, proximity to amenities and so on.

 

  • Lot size: The size of a property’s lot plays a large role in its market value. Differences in even half an acre can have a substantial impact on a home’s price.

 

  • Square footage: The larger the house, the more valuable it tends to be. Therefore, the extent of livable square footage can be just as important as the number of rooms within the home.

 

  • Age and condition of property: The year the house was built and whether it’s been recently renovated factors into the value. Newer constructions and homes built with high-end materials are often considered more valuable, though historical homes that have been recently updated can also have high purchasing prices.

 

  • Number of bedrooms and bathrooms: The more bedrooms and bathrooms a home has, the higher its value will be.

 

  • Special features: Specialty features, like fireplaces, patios, swimming pools, garages, finished basements and so on are also taken into consideration. However, it’s important to keep in mind that depending on the local market, not all special features will actually be viewed as increasing the home’s value.

 

  • Date of sale: The comps chosen should have sold within the last 3 – 6 months. If sale dates are not current, sales prices must be adjusted to reflect how the market has changed. Market conditions may vacillate either locally or nationally based on the size of inventory and changing interest rates.

 

  • Terms of financing and sale: The type of financing a buyer uses to purchase a home can impact the purchasing price, as can the terms of sale. Buyer contingencies might be accepted, but only if the offer price is higher. If a comp’s sale included seller concessions, the value of the concessions must be subtracted from its purchasing price. Such concessions may consist of the seller’s decision to pay the buyer’s closing costs or make repairs on the home prior to sale.

https://www.rocketmortgage.com/learn/comparative-market-analysis

Thinking about buying a home? Who better to turn to for advice than actual homeowners. Bank of America asked more than 1,200 homeowners what advice they would share with aspiring homebuyers, and here are the five tips that rose to the top:

  1. Start saving for your home early
  2. Consider maintenance costs and unexpected expenses
  3. Create and stick to a budget
  4. Buy a home sooner to start building equity
  5. Buy a home you can grow into, that fits future needs and goals

Sounds good. Even obvious, right? But of course some of this stuff is easier said than done. What do these tips look like in practice, in real life? To flesh them out, we asked members of our own team. There are plenty of new and long-time homeowners around Framework. What are their experiences in these areas? What have they done right? What mistakes have they made?

Take whatever ideas, motivation, and inspiration you can from these tips, successes, and cautionary tales.

 

1. Start saving for your home early

Saving for a down payment is hard these days. So, most of us need to start sooner rather than later. Yet with tight job prospects and student loan debt so often part of the equation, how do you do that? Laura lived with her parents.

The parent option isn’t always both possible and palatable. But for Laura, a content specialist at Framework, it was. And it helped her buy her own home, by herself, when she was still in her twenties.

About a third of all millennials still live with their parents, a number that’s ballooned in the last decade, according to the US Census Bureau. That’s about 24 million people between the ages of 18 and 34. Laura says that, for her, lack of job opportunities was part of it, but so was her goal of buying a home.

“When I returned to my hometown a few years after college,” she says, “I started living with my parents because I was making next to zero dollars working part-time jobs. But once I decided to become a homeowner, I continued living with my parents to save money. I paid them a modest rent and started saving everything else.”

After saving for three years — and finding full-time employment — Laura had enough for a 10% down payment on a two-bedroom townhome near St. Paul, MN. “That made my monthly payment more affordable, and I even had a few dollars left for new paint!”

 

2. Consider maintenance costs and surprise expenses

The surprise element is of course the hardest. As contradictory as it sounds, all homeowners need to plan for the unexpected. Or better yet, says Kelly, proactively dig for potential problems before they become surprises.

Consider Kelly’s %&@#! dryer vent.

“I thought it just needed to be cleaned out, but it had to be replaced, so we went from $80 to $500. Really, for that little thing,” says Kelly, a partnership associate at Framework. She recently bought a 1930s condo in the Greater Boston area.

“I think knowing ahead of time really does make a difference,” she says. “I knew going in that the furnace would need to be replaced, so I’m not so upset about that. Because I didn’t expect the dryer vent to be so much money, even though it’s thousands less than what the furnace will be, I was kind of like, What?!”

Now that she realizes how much the previous owner neglected basic maintenance, she wishes she pressed for more information from him during the sale, “maybe a checklist that would show the last time all these items were maintained or repaired.” That way, she could have prepared better both financially and mentally.

One way she’s been coping: Angie’s List* coupons. “Angie’s List somehow knows exactly what I need,” she says. “I’ve bought coupons for the dryer vent cleaning, HVAC and furnace maintenance, gutter cleaning, and waxing the floors.” Her Angie’s list experience has been so positive, she’s become a paying member.

 

3. Create and stick to a budget

Easier said than done, right? That was Prabin’s experience, until he and his wife had a baby and decided to buy a house outside Boston. The game-changer for them was Mint, the online financial management tool.

“I had always looked at my numbers in separate places,” says Prabin, Framework’s VP of operations and information systems. “I never had true visibility of all the expenses.”

“With Mint*, I have all the information pulled into a central location, and I can see all the cash coming in and all the cash going out,” he says. “The system is smart enough to divide up the categories. So, if I want to limit eating out to $200, the system will tell me if I’ve reached that.”

As part of thinking about how much house they could afford, Prabin used spreadsheets to look at the impact of different-size mortgages on their budget. “It gave me a solid understanding of how much cash would be left on a monthly basis. It was important to me not to sacrifice too much. I can cut down eating out, but not to zero.”

His one mistake, he says, was not accounting for larger utility bills, including the water and sewer bills they didn’t have as renters. It helps to ask the owner of the home you’re buying for their average costs. Be sure to find out how many people have been living in the house too, and do your best to adjust the figures up or down.

 

4. Buy a home sooner to start building equity

Buying a home can be a stretch at any age, but especially when you’re young. For Maria, a first-generation immigrant, stretching early on paid off a dozen years later with $100,000 in equity and a piece of the American Dream.

Twenty years ago, Maria and her husband had been out of college for only a year when they heard about a local revitalization program that was building affordable new single-family homes. They jumped on it. Equity wasn’t really part of their thinking at that point, says Maria, who’s now VP of product platforms at Framework. “For me, the big thing was I would be able to garden and paint the walls any color I wanted.”

They had to commit to living in the home for five years, but five years turned into twelve as they realized how much equity they were starting to build, Maria says. A rising market in their Rhode Island city helped, but they also did a lot of work on the house: over the years, they turned the little Cape’s original dirt lot into a real yard and added two bedrooms and another bathroom.

“Looking back, it was very stressful because I did not think we had enough money,” she says. “It felt like a sacrifice, but it was a manageable sacrifice. And because we were willing to take the leap and make those sacrifices early, it gave us a lot of freedom later.”

Meaning that they eventually used that equity to buy land and build something closer to their dream house in a less urban location. “All because of equity, when we had children, I could give them their own bedrooms,” Maria says. “We have deer and turkey and other wildlife in the backyard. I feel like I don’t need to move again. I feel like this is my home home.”

 

5. Buy a home you can grow into, that fits future needs and goals

This often means “plan for kids.” Family-minded Leah and her husband had their hearts set on a three-bedroom single-family house. And that required extra “scenario planning.”

“We had one kid but knew we wanted a second,” says Leah, who works at one of Framework’s nonprofit owner organizations. “So we wanted at least three bedrooms. And a backyard for them to play in.”

community they could grow into was important too, she says. The Boston-area city they bought in has good public schools and plenty of parks and kid-centered activities.

But could they afford it in the long term? “Our childcare payment for an infant was almost as much as our mortgage,” Leah says. “How would we pay our mortgage with two kids in day care?”

“We did scenario planning, basically,” she says. “I have friends in hot markets who have gone through the same thing. So I went out and asked people, How do you afford your house and have two kids?”

The solution: save in advance for that double-daycare period, building it right into the budget. They calculated the maximum mortgage payment they could handle while meeting their savings goal. “If we hadn’t planned that,” Leah says, “I think we would have had a hard time making everything fit together.”

5 Tips Every Aspiring Homebuyer Needs to Know

Real Estate Tips for a First-Time Home Seller

Various circular icons featuring people on laptops, taking photos, painting a room in a house, and looking at documents, represent a headline that reads: tips for a first-time home seller, and body copy that reads: stage your home, ask about your agent's commission, have professional photos taken, host an open house, and review your listing online.
PHOTO: THE BALANCE / EMILIE DUNPHY

Selling a home is very different from buying a home. Buying a home generally involves emotions and feelings, but selling a one typically centers on what listing agents like to call “maximizing profit potential.” The tips here apply to first-time home sellers, or any seller needing a real estate refresher.

Price Your Home Accurately

Note

You don’t want to create the wrong impression by pricing your house high and then reducing it. Nor do you want to leave money on the table.

A reputable listing agent can help you here. Don’t choose your cousin’s sister-in-law who only dabbles in real estate. You’ll fare much better if you select an experienced real estate agent who sells a fair number of listings, preferably in your neighborhood.

Your agent will analyze comparable sales and prepare an estimate of value—often called a CMA—for comparative market analysis. It is OK to compare this to the Zestimate on Zillow, but note the variances your agent will point out because your listing agent should have the experience and education to provide you with a more accurate opinion of value.1

Home-Staging Boosts Selling Power and Appeal

Ask your agent to advise you on preparing your home for sale. Most homes show better with about half of the furniture removed. If a buyer walks in the door and wonders whether anybody lives in the house, you’ve done your job correctly. Consider home-staging to boost your selling power and appeal.2

Note

Painting is the single most effective improvement you can make. Don’t let dings in the woodwork or scrapes on the walls make your home reflect deferred maintenance.

The Best Day to List Your Home

Choose the best day to list your home. This time period will vary, depending on your local community, the weather, time of year, and a host of other factors, including the state of your present real estate market. You basically get one chance to present your home in its best light on its first day on the market.

Ask About Your Agent’s Standard Real Estate Commission

If the agent’s standard real estate commission seems reasonable, consider the big picture and benefits to you to hire this individual. Check track records for performance. Don’t expect a full-service agent to discount. Getting into a contract is only the beginning; you need to make it all the way to closing.

Your home will not sell itself, despite what you may read or hear or the propensity of real estate websites to make the process appear as easy as the click of a mouse. It’s not. You don’t know what you don’t know. To get the most money from the sale of your home, you will most likely rely on the professionals you have hired to sell your home. Do not try to pit agents against each other to compete for commission, or you’ll increase the chances you’ll end up with a weasel. You don’t deserve a weasel.

Be Flexible With Home Showings

Be flexible with showings. If home showings are too much of an imposition on your life, consider going away the first weekend your home is on the market. It can feel a bit intrusive to allow strangers to trek through your home and check out your soft-closing drawers in the kitchen.

Note

The best way to sell your home is to let a buyer inside with their buyer’s agent to tour in peace and quiet. Buyer’s agents prefer to show without interference. Leave the house when buyer’s agents show up. Anything you say can and will be used against you.

Host an Open House

Allow an open house if your home is conducive to one. Not every home is a viable candidate for an open house. If your home is located in an area close to major traffic, that is generally indicative of a reasonable expectation the open house signs will pull in visitors. Ask your agent whether they advertise the open house online. Many a home buyer has had no desire to buy a home until they spot an open house and subsequently fall in love.3

Insist on Professional Photography

Of course, if you have hired a top-notch listing agent, your agent most likely already provides professional photos. It’s not enough to just get the angle right in the photo.

Note

The most popular photos are rich in color and depth, and they entice. Ask to approve the virtual tour or photo tour before it’s published.

Review Your Listing Online

Look at your home listing on various websites to make sure the information conveyed is accurate. Agents do their best to ensure accuracy, but since it is your home, you know the details better than anyone. If you spot a feature that is missing, contact your agent immediately, and ask for an inclusion.

Respond Promptly to a Purchase Offer

Try to respond promptly to a purchase offer. Many purchase offers contain a date by which the offer expires. It can drive buyers crazy if they are forced to wait for a seller to decide whether to accept their offer or to issue a counteroffer.

Line Up Movers Early

Line up your movers early. If you are thinking about moving at the end of May, for example, which is the busiest time of the year for movers, you might find it is impossible to locate movers for the day you want. You can start packing before your home hits the market, which will give you a head start on the process. It will also give you peace of mind to be prepared. Selling can be stressful enough.

Realtor: Who They are, What They do, FAQ

What Is a Realtor?

A realtor is a real estate professional who is a member of the National Association of Realtors (NAR), a professional association. The NAR defines the term realtor as a federally registered collective membership mark that identifies a real estate professional who is a member of the association and subscribes to its code of ethics.1

KEY TAKEAWAYS

  • A realtor is a real estate professional who is a member of the National Association of Realtors (NAR), a professional association.
  • Professionals who may hold the title of realtor include agents who work as residential and commercial real estate brokers, salespeople, and property managers.
  • Realtors are expected to be experts in their field.
  • They must follow the NAR’s code of ethics, which requires agents to uphold a certain standard of duty when working with clients.
  • Compliance with the code of ethics became a requisite for membership in 1924.2

Understanding Realtors

Professionals who hold the title of realtor include agents who work as residential and commercial real estate brokers, salespeople, property managers, appraisers, counselors, and other real estate professionals.

The term realtor is a registered trademark.1 As of October 2021, there were 1,564,547 realtors. That broke down as 68% real estate agents, 20% real estate brokers, and 13% associate brokers.3 Realtors must belong to both a local association or board and a state association.4

Realtors are expected to be experts in their field and must follow the NAR’s code of ethics, which requires agents to uphold a specific standard of duty to clients and customers, the public, and other realtors.

Among its many requirements, the code of ethics says that realtors “shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”

The code also states that realtors “shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations.”

Furthermore, realtors must “pledge themselves to protect and promote the interests of their client” while treating all parties to the transaction honestly.5

1,564,547

The number of realtors as of October 2021.3

Guidelines for Using the Realtor Trademark

The NAR maintains stringent rules on the use of the realtor trademark. Professionals who hold membership as a realtor or realtor-associate on a member board are licensed to use realtor trademarks in connection with their name and the name of their real estate business.

The realtor trademark is prohibited from being used as part of the legal corporate name of members of the association.6 According to the NAR, this is done to avoid the legal issues involved with a corporate name change if a member were suspended or expelled from the association and lost the right to use the trademark.7

Furthermore, the NAR’s guidelines state that if a qualified member uses the realtor trademark as part of their name, it must appear in all capital letters and be set off from the member’s name by punctuation.

The NAR does not use the realtor trademark with descriptive terms or as a description of the vocation the way terms such as real estate broker, agent, and licensee are used. The association also says that realtor trademarks are not to be used as a designation of the licensed status of a professional.86

When Was the National Association of Realtors Started?

The NAR was founded as the National Association of Real Estate Exchanges in 1908. At the time, it had 120 members, 19 boards and a single state association.

What Is the Realtor Code of Ethics?

The Code of Ethics & Professional Standards is a set of rules focused on fair and honest behavior that members pledge to abide by. They concern the manner in which clients must be treated and conflicts should be handled. The Code of Ethics holds members to a high moral standard.

How Are Real Estate Agents Different From Realtors?

Real estate agents are individuals who are licensed by their state to help people buy and sell real estate. Realtors are real estate agents who have opted to become members of the National Association of Realtors. NAR members have access to a wealth of training, tools, and data to help them provide their clients with a completely professional experience.

https://www.investopedia.com/terms/r/realtor.asp#:~:text=Key%20Takeaways-,A%20realtor%20is%20a%20real%20estate%20professional%20who%20is%20a,%2C%20salespeople%2C%20and%20property%20managers.

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